Novartis: LEADing in Emerging Markets

For a company whose HQ sits astride Europe's second-longest river, "riding the current" is a descriptive metaphor for a distinctive strategy. That strategy is to set a steady course through waves of market turbulence—connecting to the flow of opportunity, fixing a destination, and getting there first with an anchor chain of distinctive, segmented products that out-propellers the competition. Novartis CEO Joseph Jimenez calls it "focused diversification." His strategy is now being applied to aggressively expand sales by 2015—and the number of patients served—in the key emerging markets of Asia, Latin America, and Eastern Europe, where growth is trending one way: upstream.

Novartis begins the effort on a strong base, with its six top emerging markets—China, Russia, India, Brazil, South Korea, and Turkey—notching $5.8 billion in sales in 2011, up from just over $4.6 billion in 2010. In 2011, double-digit gains were posted in three of the four BRIC countries (Brazil the lone exception), with China leading at a heady 24 percent. Looking at prescription pharmaceuticals alone, the company predicts sales in the six countries will account for a fifth of the global total by 2020, compared to slightly less than 10 percent today. Hopes vested in these iconic geographies are vital to replacing the revenue from the loss of exclusivity for the company's biggest-selling medicine, the anti-hypertensive Diovan, whose U.S. patent runs out in September.

Beyond the BRICs

But there is no desire to stop there. In an interview with Pharm Exec, CEO Jimenez said management has set its sights much wider. Two other countries where Novartis is making a bet are Taiwan and Indonesia. Novartis is investing approximately $17 million annually in clinical development in Taiwan and is a key funder in clinical trials in the country. Under an existing Memorandum of Understanding with the Ministry of Economic Affairs, Novartis is working to foster local R&D and is currently collaborating with five leading medical centers to help build clinical trial capabilities and excellence. Another high-profile market is Indonesia. "Indonesia's demographics alone—the world's fourth-most-populous country, with a rising middle class—makes it a fit for all of our businesses," Jimenez says.

The play for emerging markets is a natural extension of the company's overall strategy, which is to apply the best science to those therapeutic areas where there is unmet patient need and a high potential for growth. A Swiss small-market heritage dictates an outward perspective in seeking new opportunities; through its predecessor companies, Sandoz and Ciba-Geigy, Novartis can count on a long history in the BRICs, with a business in Russia, for example, that dates back to the 19th century. More importantly, Novartis has amassed a diverse, multichannel product portfolio that can be customized to fit local health demographics and medical practice. Familiarity and depth are important to chasing profits from the often bewildering complexity of the local environment, which can consist of literally dozens of sub-markets: Urban or rural? Rich, poor, or inbetween? Variant geographies: coastal or interior? And the distinctive architecture of reimbursement: private out-of-pocket, social insurance for the manufacturing middle class, and the publicly subsidized solidarity programs for the poor? The choices are vast.